SWOT ANAL YSIS
United Parcel Service (UPS) provides transportation services, primarily domestic and international letter and package delivery.Through its non-package subsidiaries, it also provides specialized transportation, logistics and financial services.The company delivers packages each business day for 1.8 million shipping customers to 6.1 million consignees in over 200 countries and territories.The company operates a ground fleet of approximately 101,000 vehicles, ranging from custom-built package cars to large tractors and trailers, and utilizes nearly 600 airplanes.The company ’s large scale of operations enables it serve a broad customer base across the major international markets.However, the increasing fuel prices are likely to have a direct impact on the company ’s profit margins by causing an increase in the operating expenses of the company.
Weaknesses Strengths
Low operating margin in supply chain and freight business Strong market position
Strong financial performance
Unfunded employee post retirement benefits
Inorganic growth Employee productivity
Threats
Opportunities Volatile oil prices
Expanding Chinese market Economic slowdown in Europe and the US
Online shopping Labor issues Growth in European market
Strengths
Strong market position
UPS is among the top five largest package delivery companies, in terms of both revenue and volume.The company recorded revenues of $47,547 million during the fiscal year ended December 2006.The company ’s market position is also reflected by its operations.The company delivers packa
ges for around 1.8 million shipping customers to 6.1 million consignees in over 200 countries and territories each business day. In 2006, it delivered an average of 15.6 million pieces per day worldwide.The company operates an extensive integrated global ground and air network with 150,000 domestic and international access points.The company operates a ground fleet of approximately 101,000vehicles, ranging from custom-built package cars to large tractors and trailers, and utilizes nearly 600 airplanes.
Although the company ’s primary business is the time-definite delivery of packages and documents,it has extended its capabilities in recent years to encompass the broader spectrum of services known United Parcel Service, Inc.
Page 5
as supply chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions and even repairs.The company manages supply chains for large and small co
margin ratempanies in over 175 countries and territories, with about 35 million square feet of distribution space and over 900 facilities worldwide. UPS is also a leading provider of less-than truckload transportation services. The company’s strong market position and large scale of operations enable it serve a broad range of customers across the major international markets, and provide it the benefit of economies of scale.
Strong financial performance
The company has recorded a strong financial performance in recent years. UPS’s revenues grew at a compounded annual growth rate (CAGR) of 11% during 2002–2006, from $31,272 million in 2002 to $47,547 million in fiscal year 2006.The company also witnessed significant growth in its profitability.The company’s operating profit has increased from $4,096 million in 2002 to $6,635 million in 2006, representing a CAGR of 13%; while the net profit of the company grew at a CAGR of 7% from $3,182 million in 2002 to reach $4,202 million in 2006. During this five year period, the company has also maintained healthy operating and net profit margins around the 14% and 9% mark, respectively.
And also, the revenues of the company grew at a rate of 11.7%, to reach $47,547 million in fiscal yea
r 2006 from $42,581 million in 2005.This strong revenue growth of the company is attributed to various reasons across all of its operating segments. In the US domestic package services business, the company is benefited from the increase in volume of small package market; while the revenue growth in the international package division is attributed to the volume growth of export products. Further, the supply chain operations of the company are benefited by the acquisition of UPS Freight, formerly known as Overnite Corp.
The company also witnessed significant growth in its profitability during the last fiscal year.The operating profit of the company was recorded at $6,635 million during fiscal year 2006, an increase of 8% over 2005; while the net profit was recorded at $4,202 million in fiscal year 2006, an increase of 8.6% over 2005. During 2006, the operating profit margin and net profit margin of the company were 13.9% and 8.9%, respectively.The strong financial performance of the company contributed to its market dominance.
Inorganic growth
In recent times, the company has been expanding its operations thorough inorganic growth. In 2005, UPS expanded its less-than truckload (LTL) transportation services with the acquisition of Overnite,
which offers a full range of regional, interregional and long-haul LTL services to more than 60,000 customers in all 50 states, Canada, Puerto Rico, Guam, the Virgin Islands and Mexico.The company achieved revenue synergies between Overnite and its small package business, as the transition was completed in 2006. In the same year, UPS unveiled UPS FreightSM, by integrating the Overnite Corporation into the UPS brand. In 2006, the revenues of UPS freight increased at a rate of 33.5% from $5,994.0 million in 2005 to $8,002.0 million in 2006.
United Parcel Service, Inc.Page 6
In 2005, UPS spent $1,488 billion on business acquisitions, primarily Overnite; Lynx Express; Stolica; Sinotrans Air T ransportation Development in China. Lynx Express, one of the largest independent parcel carriers in the UK. Lynx also offers customers a broad suite of logistics and spare parts logistics services. Messenger Service Stolica is one of the leading parcel and express delivery companies in Poland. Sinotrans had direct control of the international express operations in 23 cities within China.The operating results of Lynx, Stolica, and Sinotrans are included in the company’s Inter
national Package reporting segment from the date of acquisition. As a result of these acquisitions, UPS’s package division’s revenue reached to $9,089 million in fiscal year 2006, an increase of 13.9% over 2005.
UPS has developed a comprehensive, integrated air and ground network in Europe through the acquisitions in Poland and UK.These acquisitions also expanded the company’s international operations and resulted in a higher revenue growth.
Weaknesses
Low operating margin in supply chain and freight business
The company witnessed poor operating profit margins in its supply chain and freight business in the recent three year period, 2004–2006.The operating margins of the supply chain and freight business of the company were 4.9%, 2.6%, .0002% during the fiscal years 2004, 2005, and 2006, respectively. The other two segments of the company recorded more than 15% of operating margin during the same period. Further more, during 2006, the company recorded an operating profit of $2 million from this division as compared to the division’s operating profit of $156 million in 2005.This was primarily impacted by the integration of the acquired Menlo Worldwide Forwarding business into
the air network. Continuing low operating margins in the supply chain and freight business would weigh heavily on overall operating profit margin.
Unfunded employee post retirement benefits
The operating cash flows of UPS declined during the fiscal year 2006.The net cash flows from operating activities have fallen to $5,589 million in 2006, from $5,793 million in 2005.The decrease in 2006 operating cash flows compared with 2005 was primarily due to higher pension and retirement plan funding. In 2006, the company funded $1.625 billion to its pension and postretirement benefit plans as compared to $995 million in 2005. As a result of the increased funding towards, the retirement benefits, the company’s operating cash flows declined at a rate of 3.6% from $5,793.0 million in 2005 to $5,589 million in 2006.
Even after this, the company has pension and postretirement benefit obligations of $2,748 million in 2006 as compared to the pension and postretirement benefit assets of $2,044 million. Sizeable unfunded post retirement benefits would force the company to make periodic cash contributions toward bridging the gap between post retirement benefits obligations and plan assets, which would reduce cash available for growth plans.
United Parcel Service, Inc.Page 7
Employee productivity
UPS posted weak revenues in proportion to the total number of employees. During 2006, the company recorded total revenues of $47,547 million with a total of 428,000 employees.The revenue per employee of the company stood at $0.11 million, significantly lower compared to its competitors. For instance, the revenue per employee of FedEx at $.24 million in 2006 was significantly higher than the revenue per employee of UPS. Similarly, the revenue per employee of Deutsche Post stood at $0.15 million.The weak revenue per employee of the company compared to the competitors indicates its weaker productivity and operational inefficiency.
Opportunities
Expanding Chinese market
UPS has been increasingly focusing on the Chinese market, one of the key growth markets in Asia. China has continued to dominate the Asia region in terms of activity and growth, with an estimated average growth of 30% over the past five years (2002–2006) in the express industry.The Chinese air express market is expected to grow at about 34%, thrice the global average of about 11% during 2005–2020.The logistics market spending in China is also likely to grow at a CAGR of 7.6% for the period 2003–2010, to reach about $500 billion, making it the third largest logistics market in the world. In 2007, the company started the construction of a new air hub in Shanghai.The International Air Hub is scheduled to open next year and will link all of China via Shanghai to UPS's international network with direct service to the Americas, Europe and Asia.With its increased focus the company is well positioned to benefit from the growing Chinese market.
Online shopping
According to the US Commerce Department, online shopping rose by 20% in 2006, extending a seven-year trend of double-digit growth.The US online retail sales reached $175 billion in 2007 from $144.6 billion in 2006. Further, the online sales are expected grow at a CAGR of 13.9% from $175 billion in 2007 to $334.7 billion in 2012. Books, videos and DVDs are the favorite low-ticket items sold online, but clothing and bigger-ticket items are becoming more popular, with clothing now accou
nting for 10% of total online sales. UPS is a leading facilitator of global e-commerce.The company provides a portfolio of solutions that streamline the customer's shipment processing and integrates transportation information into the retailer's business applications.With the expected growth rate of online shopping, the deliveries of goods are expected to increase substantially, which would boost the revenues of the company.
Growth in European market
The European express and parcel market posted steady growth during 2002–2006 and it is further expected to increase until 2012.The European express market generated total revenues of around E38,400 million in 2006, representing a compounded annual growth rate (CAGR) of 3.7% for the United Parcel Service, Inc.Page 8
five-year period spanning 2002–2006.The performance of this market is expected to grow with an anticipated CAGR of 4.5% for the five-year period 2007–2012, which would drive the market to a value of around E49,900 million by the end of 2012.
In addition, the market volumes also increased at a CAGR of 3.8% during 2002–2006, to reach around 5,200 million parcels in 2006.The market's volume is expected to rise to 6,895 million parcels by the end of 2012, representing a CAGR of 4.3% for the period 2007–2012.This robust increase in the volumes is attributed to an increase in B2C traffic, increased international volumes from this region.
UPS has strong presence in Europe and is further expanding its facilities across this region. For instance, UPS opened a European air hub in 2006, located at the Cologne/Bonn Airport, and has the sorting capacity to 110,000 packages per hour, or more than 30 packages per second. Also, in October 2006, the company reached an agreement with Poste Italiane to carry the Italian postal service's international express shipments and started its operations in November 2006 for the 14,000 post offices, Poste Italiane operates across the country. In addition, UPS also plans to utilize the Poste Italiane network for its own pickup and final delivery in certain extended areas of Italy. It could leverage its existing reach to benefit from the growth of the express and delivery markets in Central and Southern Europe.
Threats
Volatile oil prices
The company is exposed to the risk of an increase in the prices of refined fuels, principally gasoline, which is used in the transportation of the goods. For instance, the average price of WTI crude oil has been rising since 2004. In 2004, WTI crude oil averaged $41.4 per barrel.Then it increased to $56.5 per barrel in 2005, and further increased to $66.1 per barrel in 2006, approximately 20% more than the previous year’s level. Further, in February 2008, the crude oil prices crossed $100 per barrel mark due to supply concerns in Mexico, continued tensions in northern Iraq, and weak dollar. According to the forecast of the US Energy Information Administration (EIA), WTI prices are projected to average around $86 barrel in 2008 and $82 per barrel in 2009.
Higher transportation costs as a result of increased oil prices also had a substantial impact on the operating expense of the company in 2006.The fuel costs of the company increased by about 28.5% compared to the fuel cost of $2,065 million in 2005 to reach $2,655 million in fiscal 2006. Although the company charges fuel surcharges it was not able to offset the effect of higher fuel costs on its operating results for 2006, as the changes in fuel surcharges did not increase at the same proportion as the changes in fuel prices.The fuel costs of the company were actually increased by 47.2% in 2006, but were partially offset by the hedging gains (mainly from fuel surcharge).The company uses its own fleet of vehicles and third party transportation facilities for its logistics and services operations.
Higher fuel prices are likely to have a direct impact on the group’s margins since price volatility in fuel costs may cause a disproportionate increase in operating expenses of the group.
United Parcel Service, Inc.Page 9

版权声明：本站内容均来自互联网，仅供演示用，请勿用于商业和其他非法用途。如果侵犯了您的权益请与我们联系QQ:729038198，我们将在24小时内删除。